Tatsuro Senga -Appointed in AY2020

My research theme is the dynamics of the economy as a whole, such as business cycles and economic growth. Specifically, I am working on projects that study the mechanisms that impair the efficient allocation of resources in the corporate sector, focusing on the financing environment and uncertainty. We want to allocate limited funds to firms with high growth expectations rather than those with low growth expectations. However, in reality, such resource allocation is not achieved, leading to a decline in the overall economic performance. It is difficult to consider this problem using traditional macroeconomic methods that assume a representative firm. There are firms with high productivity and firms with low productivity. There are firms with high debt-to-equity ratios and firms with no debt. My main work is to create an economic model that explicitly depicts heterogeneous firms—a "sandbox," so to speak—and to conduct simulation analysis on corporate behavior and the institutions and policies surrounding it to understand why resources are not allocated efficiently.

It was my seminar professor who guided me to this research field. Since I didn't have simulation skills, I wrote a graduation thesis that organized my awareness of the issues. In my industrial research work at the Bank of Japan after graduation, I looked forward to accompanying the branch manager on visits to the Yawata Steel Works. I learned a lot from seeing him explain the capital investment behavior of related companies using theory, saying things like, "The acceleration principle applies well in these situations." Later, I was fortunate to have the opportunity to study abroad, and at The Ohio State University, where I went on the recommendation of my seminar professor, I was able to receive training in state-of-the-art "sandbox" creation. It is no exaggeration to say that choosing that seminar was the beginning of everything.

It takes several years to build one "sandbox," but it is a lot of fun. There are various firms in the sandbox, and some of them behave in ways I did not expect. For example, firms whose financing stance appears overly cautious at first glance. But as I analyze and scrutinize the sandbox, I begin to understand the reasons for their cautious financing. The firms in the sandbox are cautious because they accurately account for future uncertainty to avoid having to file for bankruptcy in the future.

However, since it is a sandbox I created myself, I eventually come to understand everything that is happening within it, down to the last detail. Then, I try implementing economic policies within the sandbox. When a policy is implemented, firms react and behave differently than before. As a result, the landscape of the sandbox can change completely. For example, we might offer tax incentives to support small and medium-sized enterprises (SMEs) and encourage them to grow significantly. In response, SMEs slow their growth because they do not want to become large corporations that are ineligible for the preferential tax treatment. Since they are reluctant to hire or make capital investments, large corporations see this as an opportunity and expand their scale. Observing the harsh competitive environment, the number of new entrants decreases, and innovation in the economy as a whole stagnates. This is a completely unintended outcome. When the surrounding conditions change, firms also change their behavior, and the entire economy moves over time. I believe the real pleasure of macroeconomics lies in analyzing such dynamic social phenomena.

I want you to value an awareness of issues that does not easily become obsolete—something akin to a "purpose" in corporate management. Until now, I have been thinking about the performance of Japanese companies and the overall economy from an overseas perspective, but what I am most looking forward to now is exploring these issues with all of you in my classes at Hiyoshi and Mita. It is an incredible stroke of luck to have come to a campus where I can engage with all of you, who will lead the future of Japanese companies, industries, and, by extension, the entire economy.

(Interview conducted in December 2020)